1. Can there be constant returns to scale in an industry with an upward-sloping supply curve? Explain.
2. What assumptions are necessary for a market to be perfectly competitive? In light of what you have learned in this chapter, why is each of these assumptions important?
3. Suppose a competitive industry faces an increase in demand (i.e., the demand curve shifts upward). What are the steps by which a competitive market insures increased output? Will your answer change if the government imposes a price ceiling?